Concrete Plant Establishment vs.
External Procurement for Structural Projects
Made by:
1) Mohamed Ahmed Abd El-Moniem
2) Mohamed Hamza Ahmed
3) Mohamed Ahmed Mohamed Abd El-Fattah
4) Mohamed Rezq Mohamed
5) Mohsen Nagh Abd Elelah
6) Mohamed Elsayed Ibrahim
7) Mohamed Reda Mohamed
Under supervision of:
Dr. / Abd El-Rahman El Mohr
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Table of contents
Table of contents…………………………………………………………………………………………….2
Abstract………………………………………………………………………………………………………….3
Introduction………………………………………………….……………………………………………….3
Analysis……………………………………………………………………….…………………………………5
Conclusion………………………………………………………………….………………………………...9
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Abstract
This report conducts a comprehensive analysis to determine the optimal economic
decision between establishing an in-house concrete plant for structural projects
and procuring concrete externally. The intricate interplay of costs, encompassing
setup expenditures, operational dynamics, and ongoing expenses, is meticulously
examined. Key factors, such as the production capacity, market trends, and the
potential impact on local economies, are scrutinized to provide a holistic
perspective. Environmental considerations, addressing emissions, waste, and
energy consumption, are woven into the fabric of the analysis. Specific examples,
including raw material acquisition, labor costs, utilities, and maintenance, shed light
on the operational cost landscape. The report also explores the regulatory
compliance associated with both options and considers the long-term viability of
each decision. Through a judicious exploration of these facets, stakeholders are
equipped with a robust framework to make informed decisions aligned with project
goals, economic efficiency, and sustainability.
Introduction
In both minor and major construction undertakings, the presence of cementitious
material is imperative, as it is recognized as the primary constituent of the
infrastructure and serves as the foundational element shaping the structure of the
facility. Concrete, the designated material in question, constitutes a blend of raw
components, encompassing sand, aggregate (comprising gravel or crushed stone),
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and cement, amalgamated with the infusion of water. Upon thorough
amalgamation, a cohesive process, referred to as the hydration period, ensues.
Concrete boasts myriad characteristics that differentiate it from alternative
materials, progressively assuming a robust and enduring form over time,
commencing from the initial setting phase and culminating in the ultimate setting
phase.
Given its pivotal role in the structural edification of the facility, concrete is employed
in substantial quantities during the construction endeavor, with the volume
employed commensurate with the project's scale.
In the context of producing concrete for medium to large-scale projects, project
management typically resorts to one of the ensuing strategies: either the
establishment of an on-site concrete batching plant or situating it near the
construction site, thereby economizing on time and transportation costs. In this
scenario, the concrete plant is deemed an integral facet of the project, and the
associated costs encompass construction outlays, maintenance expenses, raw
material costs, and operational expenditures.
Alternatively, the procurement of pre-mixed concrete, conforming to standardized
specifications or tailored to meet project-specific requirements, is considered. In
this instance, the cost per cubic meter incorporates production, transportation, and
operational expenses, amounting to approximately 1350 Egyptian Pounds.
The choice between these alternatives is contingent upon financial considerations
and temporal constraints. To make an informed decision, a comprehensive
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feasibility study is undertaken, assessing the fiscal viability of each option, and
prioritizing expeditious project completion.
Consequently, a cash flow analysis is conducted to ascertain the optimal and most
suitable course of action for project implementation and assignment.
Analysis
In evaluating the economic feasibility of establishing a concrete plant for a
structural project versus procuring concrete from external suppliers, this
comprehensive analysis navigates the intricate interplay of cost considerations,
operational dynamics, market trends, and environmental factors. By delving into
the nuanced details of each option, this study aims to guide stakeholders in making
reasonable and informed decisions, balancing economic efficiency, long-term
viability, and local economic impact for optimal project success.
The intricate interplay of costs in this decision-making process involves a meticulous
examination of both establishing a concrete plant and purchasing concrete from
external sources. On one hand, the upfront costs associated with acquiring land,
constructing facilities, and procuring the necessary equipment for a concrete plant
necessitate a significant initial investment. Conversely, purchasing concrete from
external suppliers offers the advantage of potentially lower initial setup costs, but
entails ongoing expenses tied to fluctuating market prices and transportation fees.
The analysis further dissects the operational costs, considering factors such as raw
material acquisition, labor, utilities, and maintenance for a concrete plant, and
contrasts these against the ongoing expenses associated with procuring concrete.
Striking the right balance between upfront investments and sustained operational
costs becomes pivotal in determining the most economically sound approach for
the structural project.
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continuant Quantity for Cost of unit Total
𝑚3 (EGP)
sand 0.4 𝑚3 85 EGP / 𝑚3 34
Agg. 0.8 𝑚3 230 EGP /𝑚3 184
cement 350 kg 2.1 EGP /1kg 735
water 175 L 0.075 EGP / L 13.125
Added avoid permeability 5 kg 17 EGP /kg 85
Transportation - - 20
Operational cost for plant - - 33.333
Perish ratio 1% 11.045
total 1115.5
Table 1 shows the required materials quantities and the cost for a cubic meter of concrete that is brought from an internal
plant.
Calculation of the amount of money that will be saved in the first option
(internal concrete plant):
The initial investment for this plant is.
1) The cost of the equipment = 2,000,000 EGP
2) The cost of the constructing facilities = 500,000 EGP
The operation cost.
The operational cost profile of the concrete plant is a multifaceted aspect that
encompasses key components vital for its day-to-day functionality. Foremost
among these is the salary of employees, constituting a substantial portion of
operational expenses. Skilled and unskilled labor forms the backbone of the plant's
operations, ensuring efficient production and delivery of concrete. Additionally, the
utilization of solar energy for electricity generation. The plant's maintenance, a
critical facet for equipment longevity and optimal functionality, incurs a predictable
but necessary expense. Furthermore, the inclusion of rental costs for essential
equipment such as mixer trucks, pumps, and loaders reflects the strategic decision
to leverage external resources. This not only provides flexibility in managing the
fleet but also offers a cost-effective approach, minimizing the need for extensive
capital investments. In concert, these operational cost components reflect a
comprehensive strategy to balance efficiency, environmental responsibility, and
financial prudence in the ongoing functioning of the concrete plant.
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** The operation cost if the plant works at its full capacity of (60 𝑚3 /hr.) will be
33.33 EGP for each cubic meter of concrete.
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1,800000
Fig 1: show the
cash flow of the 1 2 3 4 36
concrete plant.
2,323,958
2,500,000
So, in the case of the internal plant:
A = 2,323,958 EGP i = 1.67 % N = 36 months
𝑃1 = A (P/A, i, N) = 2,323,958 * 26.893
= 62498933 EGP (present value for the total cost of the 75000 cubic meters of
concrete)
**
The present value of the salvage value?
F = 1,800,000 EGP I = 1.67 % N = 36 months
𝑃2 = F (P/F, I, N) = 1,800,000*0.550
= 991,587 EGP
𝑃3 = initial investment = 2,500,000 EGP
𝑃𝑡𝑜𝑡𝑎𝑙 = 𝑃3 + 𝑃1 - 𝑃2 = 64,007,346 EGP (Total money invested)
The cost of the 75000 m^3 concrete = 75000 * 1350 = 101,250,000 EGP
The money saved from this investment = cost of concrete - 𝑃𝑡𝑜𝑡𝑎𝑙 = 101,250,000 -
64,007,346 = 37,242,654 EGP
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*Note this money will be saved for the project only if case of the plant works at its
full capacity 12 hours daily, if it only works for the project requirements the value
will be negative.
Continuant Quantity for Cost of unit Total
𝑚3 (EGP)
sand 0.4 𝑚3 85 EGP / 𝑚3 34
Agg. 0.8 𝑚3 230 EGP /𝑚3 184
cement 350 kg 2.1 EGP /1kg 735
water 175 L 0.075 EGP / L 13.125
Added avoid permeability 5 kg 17 EGP /kg 85
Added doubt time delay 5 kg 20 EGP / kg 100
Transportation - - 50
3
Road tolls 10 𝑚 / truck 100 EGP/ 10
truck
Operational cost for plant + pump - - 100
Perish ratio 3% 39
total 1350
Table 2 shows the required materials quantities and the cost for a cubic meter of concrete that is brought from an external plant.
The total cost of concrete for the second option = 1350 * 75000 = 101,250,000 EGP
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The environmental considerations within this decision-making process are crucial,
encompassing the ecological footprint associated with both establishing a concrete
plant and procuring concrete externally. The construction and operation of a
concrete plant introduces emissions, waste, and energy consumption that demand
scrutiny. Conversely, the environmental impact of transporting concrete from
external suppliers involves emissions from transportation and their plants. This
analysis seeks to quantify and compare the carbon footprint of each option,
weighing the emissions from the concrete plant's daily operations against the
cumulative impact of transporting ready-mix concrete. Balancing the economic
advantages with the environmental consequences, the study aims to guide a
decision that not only meets structural project requirements but also aligns with
sustainability goals and environmental stewardship.
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Conclusion
In conclusion, the comprehensive feasibility study conducted for the project has unequivocally
demonstrated that the establishment of a concrete plant comes at a cost of (64,007,346), whereas the
alternative of purchasing ready-mixed concrete would entail a higher expenditure of (101,250,000). The
considerable cost disparity of (37,242,654) underscores the financial advantages associated with opting
for the concrete plant. Therefore, based on both economic considerations and the project's financial
viability, the concrete plant emerges as the optimal and preferred choice for the successful and cost-
effective execution of the construction project.
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